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July inflation hits 2.6%, ‘highest in over 12 years’

(Singapore) CONSUMER prices staged their biggest increase in over 12 years last month as the goods and services tax hike took effect.

July’s Consumer Price Index (CPI) went up by 2.6 per cent from a year ago, the highest rate since January 1995, economists noted.

It followed the 1.3 per cent year-on-year rise in June.

The July number surpassed all forecasts by 15 private sector economists polled by Bloomberg News.

The median tip was for inflation to climb to 1.7 per cent, taking into account the 2 percentage point GST increase.

The Monetary Authority of Singapore said earlier this month that CPI inflation this year is expected to range between 0.5 and 1.5, and to nudge up to between 1 and 2 per cent next year.

The July data from the Singapore Department of Statistics showed prices climbing across all categories, from food to housing, with health-care costs up the most – by 5.7 per cent.

Food – the biggest chunk of household expenditure – cost 2.9 per cent more last month than a year ago while transport and communication costs rose 2.9 per cent.

Housing costs went up 0.7 per cent, as electricity tariffs and residential rents rose. Escalating health-care costs were a surprise, and ‘probably justify the urgency for the Government’s initiative seeking solutions to provide sustainable affordable health care’, wrote United Overseas Bank economist Alvin Liew.

Economists now expect inflationary pressures be kept up for the rest of this year.

‘With rents rising, and some retailers not passing on the GST hike until later, we expect CPI inflation to continue to climb, probably close to 3 per cent towards year-end,’ said Citigroup economist Chua Hak Bin.

The one-off GST hike will be felt for the next 11 months, and food prices will remain high, predicted Mr Liew.

‘With monthly inflation almost 1 full percentage point above market expectations, it completely pushes up the inflation outlook for the year,’ said Fortis Bank strategist Joseph Tan.

Consumers Association of Singapore president Yeo Guat Kwang, who is also MP for Aljunied GRC, said if prices go up because of supply and demand conditions, that cannot be helped: ‘What we need to ensure is that price adjustments are fair.

‘So far, we haven’t seen a phenomenon of businesses profiteering from the GST rise,’ said Mr Yeo, who is the deputy chairman of the Committee Against GST Profiteering.